China EV maker Nio to spin off its battery production unit -sources

CALB

06/12/2023 07:07

SHANGHAI, Dec 6 (Reuters) - Chinese electric vehicle
maker Nio  9866.HK  plans to spin off its battery manufacturing
unit, according to two people with knowledge of the matter, as
part of the efforts by the company to turn profitable, reduce
costs and improve efficiency. 
    The nascent battery unit, led by senior manufacturing
engineers whose previous employers include Apple  AAPL.O  and
Panasonic  6752.T , will seek external investors after the
spin-off that could happen as early as the end of this year,
with a valuation to be decided later, the people said. 
    They spoke on condition of anonymity because the information
is confidential. 
    Nio declined to comment beyond founder and CEO William Li's
comments on an earnings call on Tuesday that the automaker would
continue to do in-house research and development on batteries
but now planned to outsource all of the manufacturing.
    The company, which has a market value of $12.4 billion,
currently buys all of its batteries from CATL  300750.SZ  and
CALB Group  3931.HK . 
     The spin-off underscores Nio's efforts to turn profitable
sooner, as its previous plan was to develop and manufacture some
 batteries on its own and outsource production for the remainder
to other suppliers like Tesla does, one the people said.
    Under the plan, Nio battery unit's top engineers, some of
whose past experience also included working on quality and
supplier management at Tesla's  TSLA.O  Nevada battery factory,
will join the new firm while some staff will be merged into
other departments at Nio, both of the people said.
    Nio hired these engineers in an effort to mass produce large
cylindrical cells similar to Tesla's 4680 in a planned plant in
China's eastern Anhui province in 2025 at the earliest, the
first person said.    
    The assets to be spun off could include the planned plant,
some testing equipment and intellectual property, the person
added.
    The planned plant was expected to have an annual capacity to
produce 40 gigawatt hours (GWh) of batteries that could power
about 400,000 long-range EVs, Reuters reported in February.  
    
    GROWING LOSSES
    Nio ranked ninth in EV and plug-in hybrid sales in the first
10 months of the year in China with 126,067 units sold,
according to data from China Passenger Car Association.  
    The company reported a third-quarter loss of 4.56 billion
yuan ($637.06 million) on Tuesday, a 10.8% increase from the
same period a year ago amid a fierce EV price war. 
    Li told analysts on the earnings call that the company would
defer its plan of bringing battery production in-house because
that would not help it improve profitability over the next three
years. He did not mention any spin-off plans for the battery
manufacturing unit. 
    Nio has for years pursued a strategy of developing
end-to-end technologies for EVs including advanced
manufacturing, batteries, autonomous driving and chips.
    But Nio is now working to reassure investors concerned that
it has taken on too much as it has in recent years also ventured
into areas such as smartphone manufacturing and battery
swapping, and invested heavily in drawing top talent and
facilities. 
    The company announced last month that it would trim its
workforce and defer long-term investments, efforts executives
said could save up to 2 billion yuan in costs in 2024.
    It has also partnered with Geely  0175.HK  and state-owned
Changan Automobile  000625.SZ  to jointly develop EVs capable of
battery-swaps and to build swapping stations to reduce costs. 
    The company is also expanding abroad. Reuters reported in
October that it was considering building a dealer network in
Europe to speed up sales growth, in part to ease cash pressure. 
($1 = 7.1579 Chinese yuan renminbi)

 (Reporting by Zhang Yan, Zhuzhu Cui and Brenda Goh; Editing by
Jamie Freed)
 ((Zoey.Zhang@thomsonreuters.com;))